Carnival: Q2 Earnings

Details

June 23, 2015

Carnival Corporation & plc announced non-GAAP net income of $193 million, or $0.25 diluted EPS for the second quarter of 2015 compared to non-GAAP net income for the second quarter of 2014 of $73 million, or $0.09 diluted EPS. For the second quarter of 2015, U.S. GAAP net income, which included unrealized gains on fuel derivatives of $34 million and $7 million of restructuring expenses, was $222 million, or $0.29 diluted EPS. For the second quarter of 2014, U.S. GAAP net income was $98 million, or $0.13 diluted EPS. Revenues for the second quarter of 2015 were $3.6 billion, in line with the prior year.

Carnival Corporation & plc President and CEO Arnold Donald noted, "We more than doubled our second quarter earnings versus the comparable period a year ago and significantly exceeded our quarterly earnings guidance. Our initiatives to create demand and leverage our scale benefited both cruise ticket prices and onboard revenues contributing to 5% revenue yield improvement (constant currency) this quarter. While all of our North American brands enjoyed strong revenue yield improvement, our Carnival Cruise Line brand performed particularly well again this quarter. We thank our teams around the globe for their consistent delivery of exceptional guest experiences as well as our travel agent partners for their strong support, both of which are critical to our success."

Significant milestones during the second quarter included the launch of "fathom", the tenth brand in the Carnival Corporation family. Beginning in April 2016, "fathom" will introduce a new cruise category offering travelers authentic and meaningful experiences to targeted destinations, beginning with the Dominican Republic, to work alongside locals for transformational community impact.

Additionally, Costa began year-round service from Shanghai on Costa Serena in April and announced the deployment of Costa Fortuna to China in 2016 bringing the total to four Costa ships dedicated to Chinese guests. Princess Cruises also announced that it will expand its presence in Asia with a new ship scheduled to enter service in mid-2017 to be based in China year-round and custom-designed specifically for Chinese guests. Already the industry leader in passenger cruise days home ported in China, these developments will further the company's leading presence in this rapidly expanding market and attract new cruisers to the company's brands.

Also, earlier this month Carnival Corporation finalized a contract with Meyer Werft shipyard to build four next-generation ships that will feature the largest guest capacity in the world as well as the first cruise ships to be powered at sea by Liquefied Natural Gas, which is the world's cleanest-burning fossil fuel.

"These milestones further demonstrate our ongoing focus on effective strategic actions, technological development and innovation, laying the foundation for future growth and continued global expansion," said Donald.

Key metrics for the second quarter 2015 compared to the prior year were as follows:

On a constant dollar basis, net revenue yields (net revenue per available lower berth day or "ALBD") increased 4.1 percent for 2Q 2015, which was better than the company's guidance of up 2 to 3 percent. Gross revenue yields decreased 3.5 percent in current dollars due to changes in currency exchange rates.

Net cruise costs excluding fuel per ALBD increased 6.1 percent in constant dollars, primarily due to an increase in dry-dock days. Costs were better than March guidance, up 6.5 to 7.5 percent due to the timing of expenses between quarters. Gross cruise costs including fuel per ALBD in current dollars decreased 8.0 percent due to changes in fuel prices and currency exchange rates.

Fuel prices declined 37 percent to $411 per metric ton for 2Q 2015 from $657 per metric ton in 2Q 2014 but were higher than March guidance of $402 per metric ton.

During the last thirteen weeks, fleetwide booking volumes for the next three quarters were running well ahead of last year at slightly lower prices due to transactional currency impacts. At this time, cumulative advance bookings for the next three quarters are well ahead of the prior year at slightly lower prices again due to transactional currency impacts.

Donald noted, "Current strength in booking volumes clearly demonstrates strong consumer demand for our brands, leaving less inventory remaining for sale and building confidence in achieving significant revenue yield improvement this year. We are stepping up our marketing investment for the remainder of the year to further solidify our base of business for 2016 and drive continued yield improvement as we progress on our path toward double digit return on invested capital."

The company continues to expect full year 2015 net revenue yields on a constant currency basis to be up 3 to 4 percent, which excludes translational and transactional currency impacts, compared to the prior year (up 2 to 3 percent on a constant dollar basis compared to the prior year). The company now expects full year 2015 net cruise costs excluding fuel per ALBD to be up approximately 3 percent compared to the prior year on a constant dollar basis, which is slightly higher than had been anticipated in the March guidance mainly due to increased investment in advertising.

Taking the above factors into consideration, the company has increased its full year 2015 non-GAAP diluted earnings per share guidance to be in the range of $2.35 to $2.50, compared to 2014 non-GAAP diluted earnings of $1.93 per share.

Third Quarter 2015 Outlook

Third quarter constant currency net revenue yields are expected to be up 3 to 4 percent compared to the prior year (up 2 to 3 percent in constant dollars). Net cruise costs excluding fuel per ALBD for the third quarter are expected to be 2 to 3 percent higher on a constant dollar basis compared to the prior year. Changes in fuel prices net of derivatives, and currency is expected to reduce third quarter earnings by $0.06 per share.

Based on the above factors, the company expects non-GAAP diluted earnings for the third quarter 2015 to be in the range of $1.56 to $1.60 per share versus 2014 non-GAAP earnings of $1.58 per share.